DTN Fertilizer Outlook

Domestic Wholesale Fertilizer Prices Remain Lower on Slow Demand

(Chart courtesy of Fertecon, Agribusiness Intelligence, IHS Markit)

The following is a breakdown of wholesale prices and trends of the various fertilizers in the month of September.

AMMONIA

International:

Global ammonia prices remained largely steady throughout November with pressure on nitrate fertilizer prices and improved supply keeping prices in check.

Yara and Mosaic agreed to a $10 decrease, in the Tampa contract for December, to $250 per metric ton (mt) cost and freight (CFR). Phosphate prices dipped slightly in November and most are expecting them to remain depressed at least until early spring.

Algerian exports are increasing again as recent outages are largely overcome, although the Annaba plant has still to restart. Yara announced the closure of a small-scale plant in Trinidad by the end of year, citing lower prices and production-related issues. Nutrien purchased 25,000 tons of ammonia from Algeria for shipment to the U.S. at around $249/mt FOB (free on board -- the buyer pays for transportation of the goods).

There has still to be any sale reported from the Middle East with a spot price attached to it, so FOB prices are reported unchanged from last month at $221/mt FOB at the low end, reflecting netbacks on some contract shipments. A slightly lower price was reported than last done in China with Petronas selling 8,000 mt at $305/mt CFR.

The outlook for global ammonia is soft.

Domestic:

Domestic ammonia prices weakened in the west and remained stable in the east. Trading activity was limited with most tons trading on a contract basis with little spot interest.

Corn harvest is more than 84% complete and ammonia application has ramped up in certain areas where field conditions are supportive. There has yet to be a sustained widespread run, however, and with a Thanksgiving winter storm on the way, there is little prospect for this season to turn around in the coming weeks.

FOB prices in the Corn Belt fell slightly from $375-$400 per short ton (t) FOB in October to the current price of $365-$400/t.

LSB Industries reported that the ammonia plant at its Pryor, Oklahoma, chemical facility returned to service and resumed production on Nov. 13, along with an additional urea reactor that will be brought online sometime soon. Additionally, the ammonia plant at LSB's El Dorado, Arkansas, facility also resumed production on Nov. 19.

Ex-Oklahoma-plant prices were assessed at $300/t FOB, on track with last month's indications.

The short-term outlook is slightly soft for interior markets with reduced Northern Plains demand expected to pressure prices in certain markets.

UREA

International:

Global urea prices continued to fall in November to new lows for 2019 as producers almost everywhere decided to cut FOBs to sell to India.

Price bids for the India tender came in at $248-$251/mt CFR, down from around $270/mt in the October tender. India countered at those offers and gained acceptance for 1.7 million metric tons -- the second-largest purchase ever made by India. Logically, some hope emerged that this could potentially stabilize prices globally.

However, Brazil levels subsequently moved down to $230-$232/mt CFR, which compares to last month's levels of $252-$255/mt. Constant supply availability means that buyers there have not been squeezed to pay more.

As such, we see Egyptian FOB prices now down to $221-$226/mt FOB to reflect netbacks from India, which is the lowest price level since May 2018.

The outlook for global urea soft with oversupply problems likely to continue driving prices downward.

Domestic:

Domestic urea prices dropped again in November with New Orleans, Louisiana, (NOLA) barges falling to a low of $201/t FOB, down from prices in late October of $214-$225/t. Some traders expect sub-$200 NOLA urea before the end of the year as supply remains high.

River terminal markets are mostly around $240-$250/t FOB. Ex-plant prices were reported down this month at both Port Neal, Iowa, and at Enid, Oklahoma, to $250/t from $265-$275/t and $260/t, respectively.

On the supply side, there are expectations that domestic urea production in the coming months will be stronger than in 2018,vb which suffered from various production issues and turnarounds. Imports are also looking slightly stronger compared to last year and exports are down significantly.

Demand, while currently seasonally slow, is looking positive for the 2019-20 fertilizer year. Fall ammonia applications continue to struggle, which will likely lead to increased applications of urea in the spring. Additionally, nitrogen demand as a whole is expected to be stronger due to expectations of increased planted acres next spring.

Overall, prices are expected to continue drifting lower in the coming months, despite expectations of strong nitrogen demand for spring.

UAN

Domestic UAN fell this month at NOLA to $140/t FOB, down $10 from last month's low. River terminal pricing for 32% was mixed with $175/t FOB at St. Louis and Cincinnati, and $185-$190/t on the upper Illinois River. Ex-Oklahoma-plant prices fell slightly to a flat $170/t from $175/t last month.

After a quiet start, the markets saw some life halfway through November when CF cut river terminal prices at Cincinnati, St. Louis and Mt. Vernon, Indiana, to $175/t FOB -- down $10 from the previous price and flat with offers made for summer fill.

CF has reportedly told some customers that it will announce a spring UAN prepay program, likely in early December. Expectations on price are mixed, but buyers appear to have zero interest in purchasing tons at anything higher than current levels.

Spotty fall ammonia applications still bode well for spring UAN demand as cold, wet weather continues to prevent extended or widespread runs. Conditions have generally been more favorable in the eastern U.S. than in the west, though sources say this year remains low for ammonia sales with hardly any spot demand to speak of.

The domestic outlook for UAN remains bearish for the short term without any indications of imports slowing down, though opportunities for a good spring run cannot be ruled out.

PHOSPHATES

International:

Supply pressure continues to weigh on phosphate prices on both sides of the globe.

In Brazil, price levels edged down a few dollars with the latest MAP prices at $292-$293/mt CFR compared to $295-$298/mt at the end of October.

Spot demand elsewhere in the phosphate market remains relatively low, and FOB values continue to come under pressure as a result, with China coming in lower this month at $300-$304/mt FOB.

Asia and Europe appear to present few opportunities for suppliers to place more product in the final months of 2019. Indian demand for phosphates is now considerably diminished while Pakistan has more than covered its requirement for the Rabi season. Bangladeshi demand has also been satisfied. European buyers continue to largely delay their purchasing decisions, eyeing plentiful supply on the horizon.

With the major DAP and MAP markets of India, Brazil, Argentina, Pakistan and Bangladesh out of season and demand in Asia and South America usually remaining seasonally low into the first quarter, the outlook for global phosphates remains weak.

Domestic:

No relief for phosphate producers in November as prices continued their downward slide in the face of continued imports. The latter half of the month saw NOLA DAP traded at $242-$249/t FOB while MAP fell to $242-$250/t with DAP down $10 and MAP down $20 from late-October prices. We're continuing to see phosphates at a 10-year low with no signs of improvement.

Despite predictions of a strong fall application season this year, it seems the weather has had the final say. Market participants are reporting that volumes will be below average -- even below last year's reduced season -- which will again result in high carryover into the spring season.

River terminal prices fared better than NOLA with DAP at $290-$305/t and MAP holding at a $5-$10 premium, down from around $310-$315/t for DAP last month.

The outlook for NOLA phosphates is soft for the short term. While we are bearish about the market for fall applications, we could see some stabilization in the medium term if imports slow down and buyers decide to make their purchases for spring early.

POTASH

Domestic potash markets have held mostly steady, with spot trades few and far between as inventories remain high during this slow application season. A quiet November held NOLA barge prices at $235-$240/t FOB with little change from October.

River terminal prices have dipped slightly to around $265-$275/t FOB, down from numbers last month at $270-$280/t.

Inland FOBs remain around $280-$295/t and will likely remain weak unless the CN railway strike begins constricting supply and brings prices back up. But, right now, the demand just is not high enough to affect pricing.

The workers strike by the Teamsters Canadian rail union has forced Nutrien to announce production curtailments at its largest potash mine, starting Dec. 2. A tentative agreement was reached between the company and union earlier this week, and while some workers have started to return to work, it will take eight weeks to know the ratification results. If the strike persists longer, we could see further disruption to the market, though low activity may help insulate prices until winter fill purchases begin.

The short-term outlook for domestic potash prices is soft with lower prices anticipated for winter fill, if not before.

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Editor's Note: This information was supplied courtesy of Fertecon, Agribusiness Intelligence, IHS Markit.

(ES/AG)